Investing in Scotland's Net Zero ambition: green finance initiatives

The Scottish Government recognises that the shift to prioritising sustainable investments in Scotland requires a strong foundation and suitable incentives for domestic and international investors. There are three main programmes which underpin the green finance policy. Let’s take a closer look at each of these:

1. Scottish National Investment Bank

The Scottish National Investment Bank (SNIB) was established in February 2020 and launched in November 2020.

It is Scottish Government owned but is an operationally independent bank providing patient debt and equity to development projects which are driven by its core missions, one of which is: “Supporting Scotland’s transition to Net Zero by 2045”, in particular by: “The rebalancing of the economy towards leadership in sustainable technology, services and industry”

So the focus is very much on assisting Scotland reach its Net Zero targets.

The SNIB will have funding of £2 billion over ten years in projects which meet its missions, provided these are Scottish businesses, projects located in Scotland or business locating to Scotland. This is a substantial package with potential to support significant capital projects in line with the SNIB’s core missions.

So far SNIB has financed six projects, four of these within the current financial year:

• £12.5 million investment in Glasgow-based photonics and quantum technology company M Squared
• £40m in PfP Capital’s Mid-Market Rent Fund to help deliver affordable, quality rental homes
• £1m investment in Internet of Things communication and data service provider, R3 IOT
• £2m in electric vehicle charging network owner and operator, Forev
• £3m in IndiNature, a Borders based company which has developed a natural fibre construction insulation system
• £50m over five years for Gresham House Forestry Fund, a new fund focussed on woodland creation in Scotland.

As it does not provide grants or sub commercial investment investment decisions require the same rigour to be applied as a commercial funder would, albeit with a mission based focus.

The SNIB will be a very powerful weapon in sustainable/Net Zero supporting projects and it will undoubtedly be important in supporting Scotland to achieve Net Zero, either in its own right or as a cornerstone investor to attract other capital; but it is still very early days in that journey.

2. Green Investment Portfolio

The Green Investment Portfolio is a showcasing of market ready Scottish green projects. These are promoted by Scottish Development International seeking international equity and debt investment or co-investment alongside Scottish Government, development agencies or other private investment. The scheme launched in 2019 and the first investment opportunities became available in September 2020. The goal is for the portfolio to expand over time to include £3 billion of projects covering sectors from environmentally sustainable commercial real estate to low emission transportation and green energy.

3. Global Capital Investment Plan

Finally, the Scottish Government launched its Global Capital Investment Plan in March 2021.  This Plan seeks to increase the value of internationally mobile capital being deployed in Scotland and to increase Scotland’s links to financial centres.

The five key actions which are to be pursued by the Scottish Government under that Plan are:

• Leading on values on Net Zero and ESG  i.e. leading by example – SNIB
• Building an Investment Ready Pipeline i.e. the Green Investment Portfolio
• Right Regulations/Right Incentives – achieving the right balance, akin to the wider challenges of inward investment
• Mobilising Global Networks – showcasing of Scotland for investment in Natural Capital including stakeholder events in the run up to COP26
• Working in Partnership with the Markets – looking at what products the Scottish Government can alight on to attract capital/growth, such asa Series A fund to support innovative green business